How to claim tax exemption on your HRA

HRA (House Rent Allowance) forms a crucial component of your income. You can claim tax exemption on your HRA, subject to certain conditions. You should understand them thoroughly if you want to pocket the tax benefits. The amount exempted would be the least of the 3: i) The actual HRA printed on your pay slip, or ii) 40/50% of your basic salary + dearness allowance, or iii) The rent amount minus 10% of basic salary + dearness allowance. (Dearness allowance is generally paid mainly in government/public sector organisations and is very uncommon in private sector.) 

If you, for example, earn a salary of Rs 40,000, the HRA works out to Rs 20,000 (50% of the salary). Let us assume that you pay a rent of Rs 15,000 for an accommodation in Mumbai. Now the amount of rent paid minus 10% of the salary, which is Rs 11,000, being the least is the HRA exempt from tax. The balance Rs 9,000 (Rs 20,000 - Rs 11,000) is the taxable HRA. However, note that the actual HRA need not be 50% of basic salary. 

The amount of actual HRA would be as per the pay structure and could be more or less than 50% of the salary. However, in many companies salary is so structured that HRA is 50% (if the company is based in the Metros; else 40%) of the basic salary. 

EXEMPTION ON HRA : You can claim the rent given to parents as HRA exemption. For example, if you live with parents and pay them rent, this technically makes your parents the landlords. Then one of your parents should declare it in his/her personal income-tax return to prevent litigation in future. However, you cannot claim rent paid to spouse. Tax experts say the relationship between a husband and wife is not commercial in nature and they are supposed to stay together. So the income-tax authorities will not accept payment of rent to a spouse. 

You should provide your employer with accurate rent information so that the company can credit you with the eligible amount of relief before deducting tax at source. Another alternative is that you can also claim such exemption when you file the tax return and seek a refund. If you receive HRA for the period during which you were not occupying a rental accommodation then you would not earn any exemption. In all cases, it is advisable for you to maintain rent receipts as they are the only proof for rent payments. 

HOME LOAN AND HRA : If you took a home loan to buy a house in Mumbai, but you reside in say Bangalore for some reason, you can get tax benefits on your housing loan. Suppose you have bought a house in the same city but are staying in a rental accommodation because the house is not ready for possession, you will be entitled to the tax benefits. You can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete for possession, the HRA benefit stop tax experts say.


*From Economic Times

Market likely to consolidate on 'rocky-heels': Experts

Equities extended its winning streak to a second day as investors remained upbeat about realty, oil& gas and IT stocks. The National Stock Exchange’s Nifty gained 24 points to close at 5,556 and the 30-share Sensex strengthened 76 points to end at 18,495.

The brokerage bunch appear to share mixed views on the road ahead for the market. Amisha Vora, joint managing director of Prabhudas Lilladher believes that India is likely to outperform in the long haul overlooking the recent signs of cracks on the back of slowdown in growth.

Meanwhile, he asserts, “The heartening fact is that investors are now aware of the concerns (government inaction to RBI's efforts of taming inflation, slowdown in growth, etc) looming over the market. These negativities may continue to linger on buyer sentiments in the short-run. Hence, the market is expected to remain directionless and bottom out by the end of first quarter.”

The Nifty rose to as high as 5,570 a low of 5,508 in today's trade. It has managed to hold 5,500 levels, but volumes remain a concern. So what are the zones to watch out for on the Nifty? Vora explains that the 50-scrip index may fall to 5,200-5,300 levels if global equities witness a sharp decline.

Analysts are shrugging off the upturn seen in Tuesday's trade. Sandy Jadeja, chief market strategist-head of global training of ODL Securities warns that the key benchmark indices (Nifty and theSensex) are likely to be gripped by bears as monthly chart patterns indicate formation of a 'double top'.

Here's how the market performed on Tuesday

“According to the daily charts, the indices are trading below their 100-period moving averages,” Jadeja stated, further explaining that on the upside, Nifty will face stiff resistance around 5,800-5,900 levels, however, once the wide-based 50-share barometer breaks its support levels of 5,300-5,280, a panic sell-off may take the bourse to 5,100-mark. “So, investors need to keep a close watch on these levels in the near-term,” Jadeja cautioned.

On the other hand, Manoj Murlidharan Vayalar, associate vice president-derivatives, IIFL argues that the Nifty might rise another 150 points on the upside to 5,700-5,750 levels in the short-term. “However, a drift downward may the take the index to 5,200-5,500 levels,” Vayalar added.

Ahead of the RBI mid-quarter review on June 16, Sudip Bandyopadhyay, managing director & CEO of Destimoney Securities concludes that central bank's policy call on June 16 will influence market movement in the near-term.